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The Best Ways to Teach Your Kid to Save

With all the begging for things that kids tend to do, introducing the concept of saving money may seem like a tough sell.

You already know how important it is to start getting your child used to the idea of saving at a young age, of course, but aside from the obvious—the goal of raising financially responsible children—there may be some hidden benefits to starting them early.

According to new research from the Center for Social Development at Washington University, kids whose parents opened a savings account in their name were actually six times more likely to go to college than those who had no savings account. Although there may be a number of reasons for this correlation, it’s heartening that the habits we teach our kids now have a real impact on their lives in the future.

“It was literally just having the account that mattered, not necessarily how much was in it,” said William Elliot III, the study’s lead author and assistant professor at the University of Kansas School of Social Welfare.

While there are plenty of other factors that could have played a part in why kids with savings accounts were more likely to go to college (although the study did account for things like income, parent’s education level and children’s academic achievement), the study found that having an account to call their own taught the kids good savings patterns, which is a habit that would make a difference in any child’s financial future, whether that means going to college or not .

So while your first step is to open the account, don’t stop there: Try these tips from Laura Fisher, executive director of the American Bankers Association Education Foundation, to get your kids hooked on saving.

Pick the Best Bank

When your kid is around eight or nine, find a bank that is invested in helping children start saving—whether or not that’s the bank you already use. We recommend finding one that is actively engaged in financial education for children (more on that below) and has a kid’s account program that offers incentives (such as points that are redeemable for prizes) and that has no minimum balance and no fees (click here for a list of over 1,500 banks with kids’ programs). At this age, you’ll be opening a custodial savings account with your child, which you can learn the ins and outs of here.

Get the School Involved

Some banks can set up lessons at local schools (which usually start in second or third grade) or help you start an in-school savings club. “More and more research is showing that even once kids start saving, they still need a nudge to keep doing it,” says Fisher. “So peer pressure in this situation is a positive thing—if your kid’s friends are saving through these programs, she’ll be more likely to hop onboard.”

For example, kids might bring in portions of their allowance to deposit into their savings accounts, and the bank would dispatch someone to collect it (check out answers to any allowance questions you might have here). If your bank doesn’t have experience with these programs, you can point a manager to the ABA Teach Children to Save program for help in implementing one.

Create a Savings Support Group

Tell your extended family that your child is starting to save, and ask relatives to support him by asking about his account and giving cash gifts instead of presents for birthdays or holidays. This will help him make regular deposits and see his balance go up—and that positive reinforcement will make it fun for him to stick with the program.

Pay the Piggy

While setting up a savings account is hugely important, an old-fashioned piggy bank—where kids can make deposits of even a few cents a day—is a great way to help them reach their goals. If you have a young child, buy one that he can decorate himself, and show him how it gets heavier as he increases his “deposits.” Once he’s saved up a certain amount—say $10 or $15—then it’s time to take him to the bank.

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Go on a Financial Field Trip

Have your child make all her deposits at the bank in person. Get her to take the money right up to the counter and become used to dealing with the teller. If it’s her first visit, call ahead and see if someone can give you a tour of the vault—kids are often fascinated with that. Then, when you get home, log in online and show her where money is, and how it shows up in her account after she makes a deposit.

Set Goals

It’s hard for kids to think ten (or even two!) years down the road, so sit down with your child and help him set both short- and long-term savings goals, using the S.M.A.R.T. system, a technique for creating goals that actually stick. Especially since younger kids are more likely to afford quantity rather than quality, let them spend their short-term savings at the dollar store or a garage sale every few weeks to gain a sense of how much a certain amount of money will buy.

Encourage Competition

You may be trying to get your kids to stop squabbling over, say, who’s better at swim practice, but up the ante when it comes to savings. Set a challenge for your kids to see who can follow a budget the best, or offer to match the weekly winner’s savings contributions.

Savings is a huge part of financial responsibility—find out what other milestones are important to hit at what ages.

Tell us—what are some creative ways you’ve found to get your kids interested in saving?

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Love it. Favorite quote: “having an account to call their own taught the kids good savings patterns.” A sense of personal ownership is really key to kids learning good saving/spending habits.

There’s an option for kids between the simple piggy bank for the very young and real world bank accounts geared toward adults: the “Virtual Family Bank”. It’s a basically an Online Bank of Mom/Dad where parents run the bank and kids are the “customers” – training wheels for online banking without the real world repercussions for making mistakes. Google around and you’ll find quite a growing number of alternatives.

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